The US has warned Iraq of severe consequences if it does not allow UN weapons inspectors to resume their work.

"The forces of evil will carry their coffins on their backs to die in disgraceful failure," Saddam said.

The Pentagon is considering a possible attack to remove the Iraqi leader in order to prevent him from allegedly stockpiling nuclear and other weapons of mass destruction.

UN Secretary-General Kofi Annan has told Baghdad it must accept the UN Security Council's terms for the return of inspectors and rejected its proposal to deal with outstanding issues about its alleged weapons of mass destruction.

Saddam, in a televised speech for the anniversary of the end of the 1980-88 Iraq-Iran war, said, "The forces of evil" - a reference to the US and Britain - will "die in disgraceful failure" if they attack Iraq.

Earlier, about 15,000 members of Saddam's Jerusalem Army marched through Baghdad in a 90-minute display of support for the president.

Dressed in khaki uniforms and armed with Kalashnikov rifles, the marchers carried photographs of Saddam and placards bearing slogans such as "Long live Saddam!" and "Down with USA!"

In the past week, as rhetoric on both sides of the Iraq debate has heated up, the government has organised several such demonstrations by the Jerusalem Army, a force of men, women and children that Saddam set up two years ago, saying it would drive the Israelis out of Jerusalem.

Reports from Washington say the US government is gearing up for an attack to topple Saddam. US officials have not ruled out such a strike, but insist no decision has been made.

The United States has nearly 10,000 Army soldiers in Kuwait and heavy equipment and warplanes in bases in Qatar, the United Arab Emirates and Oman. In case of a surprise attack, strikes could also be launched from aircraft carriers in the Red Sea and the Gulf.

Washington's allies in Europe and the Arab world have warned against such a military action.

Saudi Foreign Minister Prince Saud spoke for many Arab states this week when he said his government was opposed to a US attack on Iraq and would not allow its soil to be used for such action.

German Chancellor Gerhard Schroeder has warned that a US attack on Iraq could wreck the international coalition against terrorism and throw the Middle East into turmoil.